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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

INCOME TAX
Rev. Proc. 2025-23, page 1476.

Revenue Procedure 2025-23 updates the List of Automatic
Procedures as established in Treasury and IRS guidance
for taxpayer-initiated requests for changes in methods of
accounting. An “automatic change” is a change in method
of accounting for which the taxpayer is eligible under section
5.01(1) of Revenue Procedure 2015-13 for requesting the
Commissioner’s consent for the requested year of change.

Finding Lists begin on page ii.




Bulletin No. 2025–24
June 9, 2025

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

June 9, 2025 

Bulletin No. 2025–24

Part I
26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also Part I, §§ 56, 61, 77, 118, 162, 163, 166, 167, 168, 171, 174, 179D, 194, 195, 197, 248, 263, 263A, 267, 280F, 404, 446, 447, 448, 451, 454, 455, 460, 461, 467,
471, 472, 475, 481, 585, 709, 807, 816, 832, 833, 846, 860A-860G, 861, 904, 953, 985, 1272, 1273, 1278, 1281, 1363, 1400I, 1400L, 1400N; 1.61-1, 1.61-4, 1.618, 1.77-1, 1.77-2, 1.118-2, 1.162-1, 1.162-3, 1.162-4, 1.162-11, 1.162-12, 1.166-1, 1.166-2, 1.166-4, 1.167(a)-2, 1.167(a)-3(b), 1.167(a)-4, 1.167(a)-7, 1.167(a)-8,
1.167(a)-11, 1.167(a)-14, 1.167(e)-1, 1.168(d)-1, 1.168(i)-1, 1.168(i)-4, 1.168(i)-6, 1.168(i)-7, 1.168(i)-8, 1.168(k)-1, 1.168(k)-2, 1.171-4, 1.174-1, 1.174-3, 1.174-4,
1.179-5, 1.194-1, 1.195-1, 1.197-2, 1.248-1, 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-4, 1.263(a)-5, 1.263A-1, 1.263A-2, 1.263A-3, 1.263A-4, 1.263A-7, 1.267(a)1, 1.280F-6, 1.404(b)-1T, 1.446-1, 1.446-1T, 1.446-2, 1.446-5, 1.446-6, 1.446-7, 1.448-1, 1.448-2, 1.451-1, 1.451-3, 1.451-8, 1.454-1, 1.455-6, 1.460-1, 1.460-3,
1.460-4, 1.461-1, 1.461-4, 1.461-5, 1.467-1, 1.471-1, 1.471-2, 1.471-3, 1.471-4, 1.471-5, 1.471-8, 1.472-1, 1.472-2, 1.472-6, 1.472-8, 1.481-1, 1.481-4, 1.709-1,
1.709-2, 1.832-4, 1.832-5, 1.860A-6, 1.861-18, 1.985-5, 1.985-8, 1.1016-3, 1.1245-3, 1.1272-1, 1.1273-1, 1.1273-2, 1.1275-2, 1.1363-2, 1.1374-4, 1.1400L(b)-1,
1.1502-68.)

Rev. Proc. 2025-23
LIST OF AUTOMATIC CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
SECTION 1. GROSS INCOME (§ 61). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.01 Up-front Payments for Network Upgrades received by Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
SECTION 2. COMMODITY CREDIT LOANS (§ 77). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.01 Treating amounts received as loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
SECTION 3. TRADE OR BUSINESS EXPENSES (§ 162). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.01 Advances made by a lawyer on behalf of clients. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.02 ISO 9000 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.03 Restaurant or tavern smallwares packages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.04 Timber grower fertilization costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481
.05 Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.06 Repair and maintenance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.07 Wireline network asset maintenance allowance and units of property methods of accounting under
Rev. Proc. 2011-27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.08 Wireless network asset maintenance allowance and units of property methods of accounting under
Rev. Proc. 2011-28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.09 Method of accounting under Rev. Proc. 2011-43 for taxpayers in the business of transporting, delivering,
or selling electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.10 Method of accounting under Rev. Proc. 2013-24 for taxpayers in the business of generating steam or
electric power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.11 Cable network asset capitalization methods of accounting under Rev. Proc. 2015-12. . . . . . . . . . . . . . . . . . . . . . . . . . . 1482
.12 Natural gas transmission and distribution property method of accounting under Rev. Proc. 2023-15. . . . . . . . . . . . . . . . 1483
SECTION 4. BAD DEBTS (§ 166). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1487
.01 Change from reserve method to specific charge-off method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1487
.02 Conformity election by bank after previous election automatically revoked. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1487
.03 Change to the allowance charge-off method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1488
SECTION 5. INTEREST EXPENSE (§ 163) AND AMORTIZABLE BOND PREMIUM (§ 171). . . . . . . . . . . . . . . . . . . . 1488
.01 Revocation of § 171(c) election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1488
.02 Change to comply with § 163(e)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1488
SECTION 6. DEPRECIATION OR AMORTIZATION (§§ 56(a)(1), 167, 168, 197, 280F(a), OR
1502, OR FORMER §§ 56(g)(4)(A), 168, 1400I, 1400L, OR 1400N(d)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1489
.01 Impermissible to permissible method of accounting for depreciation or amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . 1489
.02 Permissible to permissible method of accounting for depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1494
.03 Sale, lease, or financing transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1496
.04 Change in general asset account treatment due to a change in the use of MACRS property. . . . . . . . . . . . . . . . . . . . . . .1496
.05 Change in method of accounting for depreciation due to a change in the use of MACRS property. . . . . . . . . . . . . . . . . 1497

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.06 Depreciation of qualified non-personal use vans and light trucks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1498
.07 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or
amortizable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1498
.08 Tenant construction allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1499
.09 Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless
telecommunications carriers under Rev. Proc. 2011-22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1500
.10 Partial dispositions of tangible depreciable assets to which the IRS’s adjustment pertains (§ 168; § 1.168(i)-8). . . . . . . 1500
.11 Depreciation of leasehold improvements (§§ 167, 168, and 197; § 1.167(a)-4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1501
.12 Permissible to permissible method of accounting for depreciation of MACRS property (§ 168; §§ 1.168(i)-1,
1.168(i)-7, and 1.168(i)-8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1502
.13 Disposition of a building or structural component (§ 168; § 1.168(i)-8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1504
.14 Dispositions of tangible depreciable assets (other than a building or its structural components) (§ 168; § 1.168(i)-8). . 1508
.15 Dispositions of tangible depreciable assets in a general asset account (§ 168(i)(4); § 1.168(i)-1) . . . . . . . . . . . . . . . . . . 1510
.16 Summary of certain changes in methods of accounting related to dispositions of MACRS property. . . . . . . . . . . . . . . . 1512
.17 Depreciation of fiber optic transfer node and fiber optic cable used by a cable system operator (§§ 167 and 168). . . . . 1515
.18 Qualified improvement property placed in service after December 31, 2017 (§ 168). . . . . . . . . . . . . . . . . . . . . . . . . . . . 1515
.19 Certain late elections under §§ 168 and 1502 or revocation of certain elections under § 168 (§ 168(g)(7),
(k)(5), (k)(7), and (k)(10); §§ 1.168(k)-2 and 1.1502-68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1516
.20 Change in depreciation as a result of applying the additional first year depreciation regulations (§ 168(k);
§§ 1.168(k)-2 and 1.1502-68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1517
.21 Depreciation of tangible property under § 168(g) by controlled foreign corporations.. . . . . . . . . . . . . . . . . . . . . . . . . . . 1518
SECTION 7. RESEARCH AND EXPERIMENTAL EXPENDITURES (§ 174). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1519
.01 Change in Method of Accounting for SRE Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1519
SECTION 8. ELECTIVE EXPENSING PROVISIONS (§ 179D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1520
.01 Deduction for Energy Efficient Commercial Buildings (§ 179D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1520
SECTION 9. COMPUTER SOFTWARE EXPENDITURES (§§ 162, 167, AND 197). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1521
.01 Computer software expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1521
SECTION 10. START-UP EXPENDITURES AND ORGANIZATIONAL FEES (§§ 195, 248 AND 709). . . . . . . . . . . . . 1521
.01 Start-up expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1521
.02 Organizational expenditures under § 248. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1522
.03 Organization fees under § 709. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1522
SECTION 11. CAPITAL EXPENDITURES (§ 263). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1522
.01 Package design costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1522
.02 Line pack gas or cushion gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1523
.03 Removal costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1523
.04 Distributor commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1523
.05 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1524
.06 Rotable spare parts safe harbor method.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1524
.07 Repairable and reusable spare parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1524
.08 Tangible property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1525
.09 Railroad track structure expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1528
.10 Remodel-refresh safe harbor method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1528
SECTION 12. UNIFORM CAPITALIZATION (UNICAP) METHODS (§ 263A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1529
.01 Certain uniform capitalization (UNICAP) methods used by resellers and reseller-producers. . . . . . . . . . . . . . . . . . . . . .1529
.02 Certain uniform capitalization (UNICAP) methods used by producers and reseller-producers . . . . . . . . . . . . . . . . . . . . 1533
.03 Impact fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1534
.04 Change to capitalizing environmental remediation costs under § 263A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1534
.05 Change in allocating environmental remediation costs under § 263A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1534
.06 Safe harbor methods under § 263A for certain dealerships of motor vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1535
.07 Change to not apply § 263A to one or more plants removed from the list of plants that have a preproductive
period in excess of 2 years.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1535

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.08 Change to a reasonable allocation method described in § 1.263A-1(f)(4) for self-constructed assets . . . . . . . . . . . . . . . 1535
.09 Real property acquired through foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1536
.10 Sales-Based Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1536
.11 Treatment of Sales-Based Vendor Chargebacks under a Simplified Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1537
.12 U.S. ratio method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1537
.13 Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1538
.14 Interest capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1539
.15 Change to not apply § 263A to replanting costs for lost or damaged citrus plants pursuant to § 263A(d)(2)(C). . . . . . . 1539
.16 Small business taxpayer exception from requirement to capitalize costs under § 263A. . . . . . . . . . . . . . . . . . . . . . . . . . 1540
.17 Recharacterizing costs under the simplified resale method, simplified production method, or the modified
simplified production method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1540
SECTION 13. L OSSES, EXPENSES AND INTEREST WITH RESPECT TO TRANSACTIONS BETWEEN
RELATED TAXPAYERS (§ 267) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1541
.01 Change to comply with § 267. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1541
SECTION 14. DEFERRED COMPENSATION (§ 404). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1541
.01 Deferred compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1541
.02 Grace period contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1542
SECTION 15. METHODS OF ACCOUNTING (§ 446). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1542
.01 Change in overall method from the cash method, or from an accrual method with regard to purchases and
sales of inventories and the cash method for all other items, to an accrual method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1542
.02 Multi-year insurance policies for multi-year service warranty contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1544
.03 Nonaccrual-experience method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1544
.04 Interest accruals on short-term consumer loans—Rule of 78’s method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545
.05 Film producer’s treatment of certain creative property costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545
.06 Deduction of incentive payments to health care providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1546
.07 Change by bank for uncollected interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1546
.08 Change from the cash method to an accrual method for specific items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1546
.09 Multi-year service warranty contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1547
.10 Overall cash method for specified transportation industry taxpayers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1547
.11 Change to overall cash/hybrid method for certain banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1549
.12 Change to overall cash method for farmers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1550
.13 Nonshareholder contributions to capital under § 118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1550
.14 Debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1550
.15 Transfers of interties under the safe harbor described in Notice 2016-36 (§ 118).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1550
.16 Change to or from the net asset value (NAV) method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1551
.17 Small business taxpayer changing the overall method of accounting to the cash method, or to a method of
accounting in which a small business taxpayer uses an accrual method for purchases and sales of inventories
and uses the cash method for computing all other items of income and expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1551
SECTION 16. TAXABLE YEAR OF INCLUSION (§ 451). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.01 Accrual of interest on nonperforming loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.02 Advance rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.03 State or local income or franchise tax refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.04 Capital Cost Reduction Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.05 Credit card annual fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1553
.06 Retainages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1554
.07 Change in applicable financial statements (AFS) for purposes of applying certain revenue recognition
methods of accounting.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1554
.08 Changes in the timing of income recognition under § 451(b) and (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1555
SECTION 17. OBLIGATIONS ISSUED AT DISCOUNT (§ 454). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1561
.01 Series E, EE or I U.S. savings bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1561

June 9, 2025

1478

Bulletin No. 2025–24

SECTION 18. PREPAID SUBSCRIPTION INCOME (§ 455). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1561
.01 Prepaid subscription income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1561
SECTION 19. SPECIAL RULES FOR LONG-TERM CONTRACTS (§ 460) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1562
.01 Small business taxpayer exceptions from requirement to account for certain long-term contracts under § 460 or to
capitalize costs under § 263A for certain home construction contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1562
.02 Change to rely on the interim guidance provided in section 8 of Notice 2023-63, 2023-39 I.R.B. 919. . . . . . . . . . . . . . 1562
SECTION 20. TAXABLE YEAR INCURRED (§ 461) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563
.01 Timing of incurring liabilities for employee compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563
(1) Self-insured employee medical benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563
(2) Bonuses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563
(3) Vacation pay, sick pay, and severance pay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1564
(4) Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1564
.02 Timing of incurring liabilities for real property taxes, personal property taxes, state income taxes, and
state franchise taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1565
.03 Timing of incurring liabilities under a workers’ compensation act, tort, breach of contract, or violation of law. . . . . . . 1565
.04 Timing of incurring certain liabilities for payroll taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1565
.05 Cooperative advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1566
.06 Timing of incurring certain liabilities for services or insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1566
.07 Rebates and allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1567
.08 Ratable accrual of real property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1567
.09 California Franchise Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1567
.10 Gift cards issued as a refund for returned goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1567
.11 Timing of incurring liabilities under the recurring item exception to the economic performance rules. . . . . . . . . . . . . . 1567
.12 Economic performance safe harbor for ratable service contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1568
.13 Alternative Cost Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1568
SECTION 21. RENT (§ 467) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1569
.01 Change from an improper method of inclusion of rental income or expense to inclusion in accordance with
the rent allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1569
SECTION 22. INVENTORIES (§ 471). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1569
.01 Cash discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1569
.02 Estimating inventory “shrinkage.”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1570
.03 Qualifying volume-related trade discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1570
.04 Impermissible methods of identification and valuation of inventories.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1571
.05 Core Alternative Valuation Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1571
.06 Replacement cost for automobile dealers’ parts inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1571
.07 Replacement cost for heavy equipment dealers’ parts inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1572
.08 Rotable spare parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1572
.09 Advance Trade Discount Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1572
.10 Permissible methods of identification and valuation of inventories.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1572
.11 Change in the official used vehicle guide utilized in valuing used vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1573
.12 Invoiced advertising association costs for new vehicle retail dealerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1573
.13 Rolling-average method of accounting for inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1573
.14 Sales-Based Vendor Chargebacks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1574
.15 Certain changes to the cost complement of the retail inventory method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1574
.16 Certain changes within the retail inventory method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1574
.17 Change from currently deducting inventories to permissible methods of identification and valuation of inventories.. . . 1574
.18 Small business taxpayer § 471(c) inventory methods.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1575
.19 Changes within a § 471(c) inventory method.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1575
.20 Change from a small business taxpayer § 471(c) inventory method to an inventory method under § 471(a).. . . . . . . . . 1576
SECTION 23. LAST-IN, FIRST-OUT (LIFO) INVENTORIES (§ 472). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1576
.01 Change from the LIFO inventory method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1576
.02 Determining current-year cost under the LIFO inventory method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1577

Bulletin No. 2025–24

1479

June 9, 2025

.03 Alternative LIFO inventory method for retail automobile dealers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1578
.04 Used vehicle alternative LIFO method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1578
.05 Determining the cost of used vehicles purchased or taken as a trade-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1579
.06 Change to the inventory price index computation (IPIC) method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1579
.07 Changes within the inventory price index computation (IPIC) method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1580
.08 Changes to the Vehicle-Pool Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1581
.09 Changes within the used vehicle alternative LIFO method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1581
.10 Changes to dollar-value pools of manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1581
SECTION 24. MARK-TO-MARKET ACCOUNTING METHOD (INCLUDING § 475) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1581
.01 Commodities dealers, securities traders, and commodities traders electing to use the mark-to-market method of
accounting under § 475(e) or (f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1581
.02 Taxpayers requesting to change their method of accounting from the mark-to-market method of accounting
described in § 475 to a realization method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1582
SECTION 25. BANK RESERVES FOR BAD DEBTS (§ 585). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1584
.01 Changing from the § 585 reserve method to the § 166 specific charge-off method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1584
SECTION 26. INSURANCE COMPANIES (§§ 807, 816, 832, 833). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1585
.01 Safe harbor method of accounting for premium acquisition expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1585
.02 Certain changes in method of accounting for organizations to which § 833 applies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1586
.03 Change in qualification as life/nonlife insurance company under § 816. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1586
.04 Changes in basis of computing reserves under § 807(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1586
SECTION 27. DISCOUNTED UNPAID LOSSES (§ 846). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1588
.01 Composite method for discounting unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1588
SECTION 28. REAL ESTATE MORTGAGE INVESTMENT CONDUIT (REMIC) (§§ 860A-860G) . . . . . . . . . . . . . . . . 1588
.01 REMIC Inducement Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1588
SECTION 29. FUNCTIONAL CURRENCY (§ 985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1589
.01 Change in functional currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1589
SECTION 30. ORIGINAL ISSUE DISCOUNT (§§ 1272, 1273). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1589
.01 De minimis original issue discount (OID). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1589
.02 Proportional method of accounting for OID on a pool of credit card receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1589
SECTION 31. MARKET DISCOUNT BONDS (§ 1278). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590
.01 Revocation of § 1278(b) election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590
SECTION 32. SHORT-TERM OBLIGATIONS (§ 1281). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590
.01 Interest income on short-term obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590
.02 Stated interest on short-term loans of cash method banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1590
EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1591
EFFECT ON OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1592
PAPERWORK REDUCTION ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1593
SIGNIFICANT CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1593
DRAFTING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1595
LIST OF AUTOMATIC CHANGES CONTACT LIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1596

June 9, 2025

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Bulletin No. 2025–24

This revenue procedure provides the
List of Automatic Changes to which the
automatic change procedures in Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, as clarified and modified by Rev. Proc. 2015-33,
2015-24 I.R.B. 1067, and as modified by
Rev. Proc. 2021-34, 2021-35 I.R.B. 337,
by Rev. Proc. 2021-26, 2021-22 I.R.B.
1163, by Rev. Proc. 2017-59, 2017-48
I.R.B. 543, and by section 17.02(b) and
(c) of Rev. Proc. 2016-1, 2016-1 I.R.B. 1,
apply. The definitions in section 3 of Rev.
Proc. 2015-13 apply to this revenue procedure.
LIST OF AUTOMATIC CHANGES
SECTION 1. GROSS INCOME (§ 61)
.01 Up-front Payments for Network
Upgrades received by Utilities.
(1) Description of change. This change
applies to a Utility that wants to change its
method of accounting for Up-front Payments to the safe harbor method described
in Rev. Proc. 2005-35, 2005-2 C.B. 76. In
general, this change applies to a Utility
that receives an Up-front Payment from
a Generator to finance Network Upgrades
to the Utility’s Transmission System.
For federal income tax purposes, if an
Up-front Payment is made pursuant to
an Interconnection Agreement that satisfies all of the conditions of section 5.02
of Rev. Proc. 2005-35, a Utility may treat
that Up-front Payment as not being taxable income under § 61 when received
(the safe harbor method). In addition, a
Utility that uses the safe harbor method is
not entitled to any deduction for its reimbursements of the Up-front Payment. To
the extent that Federal Energy Regulatory
Commission (FERC) interest is deductible, it must be properly allocated to the
periods in which it accrues. A Utility
using the safe harbor method must comply with all other applicable provisions of
Rev. Proc. 2005-35. See Rev. Proc. 200535 for the definitions of certain terms for
purposes of this change.
(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
1.01 is “91.”
(3) Contact information. For further
information regarding a change under this

Bulletin No. 2025–24

section, contact William E . Blanchard at
(202) 317-3900 (not a toll-free number) .
SECTION 2 . COMMODITY CREDIT
LOANS (§ 77)
.01 Treating amounts received as
loans .
(1) Description of change . This
change applies to a taxpayer that wants to
change its method of accounting for loans
received from the Commodity Credit Corporation from including the loan amount
in gross income for the taxable year in
which each loan is received to treating
each loan amount as a loan .
(2) Certain eligibility rule inapplicable . The eligibility rule in section 5 .01(1)
(f) of Rev . Proc . 2015-13, 2015-5 I .R .B .
419, does not apply to this change .
(3) Manner of making change . This
change is made on a cut-off basis and
applies only to loans received from the
Commodity Credit Corporation on or
after the beginning of the year of change .
Accordingly, a § 481(a) adjustment is neither permitted nor required .
(4) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
2 .01 is “1 .”
(5) Contact information . For further
information regarding a change under this
section, contact Michael Finn at (202)
317-4718 (not a toll-free number) .
SECTION 3 . TRADE OR BUSINESS
EXPENSES (§ 162)
.01 Advances made by a lawyer on
behalf of clients .
(1) Description of change . This change
applies to a lawyer who advances money
to pay for costs of litigation or for other
expenses on behalf of clients, and who
wants to change the method of accounting for such advances from treating them
as deductible business expenses to treating them as loans to clients . This change
applies to cases handled either on a
non-contingent or a contingent fee basis .
See Pelton & Gunther, P.C. v. Commissioner, T .C . Memo . 1999-339 (non-contingent fee); Canelo v. Commissioner, 53
T .C . 217 (1969), aff’d per curiam, 447
F .2d 484 (9th Cir . 1971) (contingent fee) .

1481

(2) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
3 .01 is “2 .”
(3) Contact information . For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number) .
.02 ISO 9000 costs .
(1) Description of change . This change
applies to a taxpayer that wants to change
its method of accounting for costs incurred
to obtain, maintain, and renew ISO 9000
certification to conform with Rev. Rul.
2000-4, 2000-1 C.B. 331, as modified by
this revenue procedure .
(2) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
3 .02 is “3 .”
(3) Contact information . For further
information regarding a change under this
section, contact Alicia Lee-Won at (202)
317-7003 (not a toll-free number) .
.03 Restaurant or tavern smallwares
packages .
(1) Description of change . This change
applies to a taxpayer engaged in the trade
or business of operating a restaurant or
tavern (within the meaning of section
4 .01 of Rev . Proc . 2002-12, 2002-1 C .B .
374) that wants to change its method of
accounting for the costs of smallwares to
the smallwares method described in Rev .
Proc. 2002-12, as modified by this revenue procedure .
(2) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
3 .03 is “4 .”
(3) Contact information . For further
information regarding a change under
this section, contact Benjamin Masselli at
(202) 317-7003 (not a toll-free number) .
.04 Timber grower fertilization costs .
(1) Description of change . This change
applies to a timber grower that wants to
change its method of accounting to treat
post-establishment fertilization costs of
an established timber stand as ordinary
and necessary business expenses deductible under § 162 . See Rev . Rul . 2004-62,
2004-1 C.B. 1072, as modified by this revenue procedure .

June 9, 2025

(2) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.04 is “86.”
(3) Contact information. For further
information regarding a change under this
section, contact Maria Castillo Valle at
(202) 317-7003 (not a toll-free number).
.05 Materials and supplies. See section
11.08 of this revenue procedure.
.06 Repair and maintenance costs. See
section 11.08 of this revenue procedure.
.07 Wireline network asset maintenance allowance and units of property
methods of accounting under Rev. Proc.
2011-27.
(1) Description of change. This change
applies to a wireline telecommunications
carrier that is within the scope of Rev.
Proc. 2011-27, 2011-18 I.R.B. 740, and
wants to change its treatment of wireline
network asset expenditures to use either
(a) the wireline network asset maintenance allowance method of accounting,
or (b) all or some of the units of property
described in Rev. Proc. 2011-27.
(2) Section 481(a) adjustment. In general, a change to the wireline network
asset maintenance allowance method of
accounting or to use all or some of the units
of property specified in Rev. Proc. 201127 requires an adjustment under § 481(a).
The § 481(a) adjustment shall not include
any amount attributable to property for
which the taxpayer elected to apply the
repair allowance under § 1.167(a)-11(d)
(2) for any taxable year in which the election was made.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.07 is “158.”
(4) Contact information. For further
information regarding a change under this
section, contact Ian Heminsley at (202)
317-5100 (not a toll-free number).
.08 Wireless network asset maintenance allowance and units of property
methods of accounting under Rev. Proc.
2011-28.
(1) Description of change. This change
applies to a wireless telecommunications
carrier that is within the scope of Rev.
Proc. 2011-28, 2011-18 I.R.B. 743, and
wants to change its treatment of wireless

June 9, 2025

network asset expenditures to use either
(a) the wireless network asset maintenance allowance method of accounting,
or (b) all or some of the units of property
described in Rev. Proc. 2011-28.
(2) Section 481(a) adjustment. In general, a change to the wireless network
asset maintenance allowance method of
accounting or to use all or some of the units
of property specified in Rev. Proc. 201128 requires an adjustment under § 481(a).
The § 481(a) adjustment does not include
any amount attributable to property for
which the taxpayer elected to apply the
repair allowance under § 1.167(a)-11(d)
(2) for any taxable year in which the election was made.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.08 is “159.”
(4) Contact information. For further
information regarding a change under this
section, contact Riston Escher at (202)
317-5100 (not a toll-free number).
.09 Method of accounting under Rev.
Proc. 2011-43 for taxpayers in the business of transporting, delivering, or selling
electricity.
(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2011-43, 2011-37
I.R.B. 326, and wants to change its treatment of transmission and distribution
property expenditures to use the method
of accounting described in Rev. Proc.
2011-43.
(2) Section 481(a) adjustment. A taxpayer must take the entire net § 481(a)
adjustment into account (whether positive
or negative) in computing taxable income
for the year of change. The § 481(a)
adjustment does not include any amount
attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any
taxable year in which the election was
made. For guidance regarding permissible § 481(a) calculation methodologies,
see section 7.02 and Appendix A of Rev.
Proc. 2011-43.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.09 is “160.”

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(4) Contact information. For further
information regarding a change under this
section, contact Riston Escher at (202)
317-5100 (not a toll-free number).
.10 Method of accounting under Rev.
Proc. 2013-24 for taxpayers in the business of generating steam or electric
power.
(1) Description of change. This change
applies to a taxpayer that is within the
scope of Rev. Proc. 2013-24, 2013-22
I.R.B. 1142, and wants to change its treatment of generation property expenditures
to use all or some of the unit of property
definitions and the corresponding major
component definitions described in Rev.
Proc. 2013-24.
(2) Section 481(a) adjustment.
(a) A taxpayer must take the entire net
§ 481(a) adjustment into account (whether
positive or negative) in computing taxable
income for the year of change. For guidance regarding the use of extrapolation in
computing a § 481(a) adjustment, see section 6.02 and Appendix B of Rev. Proc.
2013-24.
(b) A taxpayer changing to this method
of accounting must not include in the
§ 481(a) adjustment any amount attributable to property for which the taxpayer
elected to apply the repair allowance
under § 1.167(a)–11(d)(2) for any taxable
year in which the repair allowance election was made.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
3.10 is “182.”
(4) Contact information. For further
information regarding a change under
this section, contact Morgan Lawrence at
(202) 317-7011 (not a toll-free number).
.11 Cable network asset capitalization
methods of accounting under Rev. Proc.
2015-12.
(1) Description of change. This change
applies to a cable system operator that is
within the scope of Rev. Proc. 2015-12,
2015-2 I.R.B. 266, and wants to make
one or more of the following changes in
method of accounting:
(a) Change its treatment of cable network asset expenditures to the cable
network asset maintenance allowance
method of accounting provided in section
5 of Rev. Proc. 2015-12;

Bulletin No. 2025–24

(b) Change to use any of the unit of
property definitions provided in section 6
of Rev. Proc. 2015-12;
(c) Change to use the specific identification method for installations and
customer drop costs described in section
7.01(1) of Rev. Proc. 2015-12;
(d) Change to use the safe harbor
allocation method for installations and
customer drop costs described in section
7.01(2) of Rev. Proc. 2015-12; or
(e) Change to deduct the labor costs
associated with installing customer premises equipment under section 7.02 of Rev.
Proc. 2015-12.
(2) Concurrent automatic change. A
taxpayer that wants to make one or more
changes in method of accounting pursuant to this section 3.11 and a change to
a UNICAP method under section 12 of
this revenue procedure for the same year
of change should file a single Form 3115
that includes all of these changes and must
enter the designated automatic accounting
method change numbers for all of these
changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.
(3) Section 481(a) adjustment.
(a) In general, a change to one or
more of the changes in method of
accounting described in section 3.11(1)
of this revenue procedure requires an
adjustment under § 481(a). The § 481(a)
adjustment shall not include any amount
attributable to property for which the
taxpayer elected to apply the repair
allowance under § 1.167(a)-11(d)(2) for
any taxable year in which the election
was made.
(b) Itemized listing on Form 3115. The
taxpayer must include on Form 3115 (Rev.
December 2022), Part IV, line 26, the total
§ 481(a) adjustment for all changes in
methods of accounting being made. If the
taxpayer is making more than one change
in method of accounting under Rev. Proc.
2015-12, the taxpayer must include on an
attachment to Form 3115:
(i) the information required by Part
IV, line 26 for each change in method of
accounting (including the amount of the
§ 481(a) adjustment for each change in
method of accounting, which includes the
portion of the § 481(a) adjustment attributable to UNICAP);

Bulletin No. 2025–24

(ii) the information required by Part
II, line 14 of Form 3115 that is associated
with each change; and
(iii) the citation to the paragraph of
Rev. Proc. 2015-12 that provides for each
proposed method of accounting.
(4) Designated automatic accounting method change number. The designated automatic accounting method
change number for a change to a method
of accounting provided in section 5 or 6
of Rev. Proc. 2015-12 is “208.” The designated automatic accounting method
change number for a change to a method
of accounting provided in section 7 of
Rev. Proc. 2015-12 is “209.”
(5) Contact information. For further
information regarding a change under this
section, contact Riston Escher at (202)
317-5100 (not a toll-free number).
.12 Natural gas transmission and distribution property method of accounting
under Rev. Proc. 2023-15.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that is within the scope of
Rev. Proc. 2023-15 and wants to change
its treatment of natural gas transmission
and distribution property costs to use the
natural gas transmission and distribution
property safe harbor method of accounting (NGSH Method) described in Rev.
Proc. 2023-15. Specifically, this change
applies to a taxpayer that wants to change
to “the safe harbor method for linear
property” or “the safe harbor method for
non-linear property” and other applicable rules in accordance with Rev. Proc.
2023-15, including the making of a late
general asset account election as required
under section 5.08(2) of Rev. Proc. 202315. This change also applies to a taxpayer
that previously changed to the safe harbor method for linear property and wants
to change to the safe harbor method for
non-linear property for a subsequent taxable year.
(b) Inapplicability. This change does
not apply to the making of a late general
asset account election other than in accordance with section 5.08(2) of Rev. Proc.
2023-15.
(2) Certain eligibility rules temporarily
inapplicable.
(a) In general. The eligibility rules in
section 5.01(1)(d) and (f) of Rev. Proc.
2015-13 do not apply to a taxpayer that

1483

changes to the NGSH Method provided
in Rev. Proc. 2015-13 for its first, second,
or third taxable year ending after May 1,
2023.
(b) Concurrent automatic change.
(i) If a taxpayer makes both a change
under this section 3.12 and a change under
section 6.12(3)(b) and/or section 6.15 of
this revenue procedure for linear property
and/or non-linear property for its first,
second, or third taxable year ending after
May 1, 2023, on a single Form 3115 for
the same asset for the same year of change
in accordance with section 3.12(6)(b)
of this revenue procedure, the eligibility
rules in section 5.01(1)(d) and (f) of Rev.
Proc. 2015-13 do not apply to the taxpayer
for these changes.
(ii) If a taxpayer makes both a change
under this section 3.12 and a change under
section 11.08, 12.01, 12.02, 12.08, and/or
12.12 of this revenue procedure, as applicable, for its linear property or non-linear
property costs in its first, second, or third
taxable year ending after May 1, 2023, on
a single Form 3115 for the same year of
change in accordance with section 3.12(6)
(c) of this revenue procedure, the eligibility rules in section 5.01(1)(d) and (f) of
Rev. Proc. 2015-13 do not apply to the
taxpayer for these changes.
(3) Manner of making change.
(a) Late general asset account election.
(i) The late general asset account election change described in section 5.08(2)
of Rev. Proc. 2023-15 is made using a
modified cut-off method under which
the unadjusted depreciable basis and
the depreciation reserve of the asset as
of the beginning of the year of change
are accounted for using the proposed
method of accounting. The late general
asset account election change requires
each general asset account to include a
beginning balance for both the unadjusted depreciable basis and the depreciation reserve. The beginning balance for
the unadjusted depreciable basis of each
general asset account is equal to the sum
of the unadjusted depreciable bases as of
the beginning of the year of change for
all assets included in that general asset
account. The beginning balance of the
depreciation reserve of each general asset
account is equal to the sum of the greater
of the depreciation allowed or allowable
as of the beginning of the year of change

June 9, 2025

for all assets included in that general
asset account.
(ii) For the late general asset account
election change described in section
5.08(2) of Rev. Proc. 2023-15, the taxpayer must attach to its Form 3115 a statement providing that the taxpayer agrees to
the following additional terms and conditions:
(A) The taxpayer consents to, and
agrees to apply, all the provisions of
§ 1.168(i)-1 to the assets that are subject
to the election specified in section 5.08(2)
of Rev. Proc. 2023-15; and
(B)
Except
as
provided
in
§ 1.168(i)-1(c)(1)(ii)(A), (e)(3), (g), or (h),
the election made by the taxpayer under
section 5.08(2) of Rev. Proc. 2023-15 is
irrevocable and will be binding on the taxpayer for computing taxable income for
the year of change and for all subsequent
taxable years with respect to the assets
that are subject to this election.
(b) Cut-off basis for certain changes.
Except for changes to make a late general
asset account election described in section
3.12(3)(a) of this revenue procedure, a
change to the NGSH Method described in
Rev. Proc. 2023-15 is made on a cut-off
basis and applies only to natural gas transmission and distribution property costs
paid or incurred beginning in or after the
year of change if(i) Sections 5.08(2)(a)(ii) and 6.04 of
Rev. Proc. 2023-15 apply (the taxpayer
changes to the NGSH Method described
in Rev. Proc. 2023-15 for the first, second,
or third taxable year ending after May 1,
2023, on a cut-off basis); or
(ii) Section 5.08(2)(a)(iii) of Rev. Proc.
2023-15 applies (the taxpayer changes to
the NGSH Method described in Rev. Proc.
2023-15 for the fourth taxable year ending
after May 1, 2023, or for any subsequent
taxable year).
(c) Public Utility Property. If the taxpayer’s change to the NGSH Method
described in Rev. Proc. 2023-15 applies
to any asset that is public utility property within the meaning of § 168(i)(10),
the taxpayer must attach a statement to
its Form 3115 agreeing to the following
additional terms and conditions:
(i) A normalization method of accounting (within the meaning of § 168(i)(9))
will be used for the public utility property
subject to the Form 3115;

June 9, 2025

(ii) As of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
account in the taxpayer’s regulatory books
of account by the amount of the deferral
of federal income tax liability associated
with the § 481(a) adjustment applicable
to the public utility property subject to the
Form 3115 if such amount is no longer
being normalized for regulatory purposes
by the taxpayer; and
(iii) Within 30 calendar days of filing
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over
the public utility property subject to the
Form 3115.
(4) Section 481(a) adjustment.
(a) In general. Except as provided in
section 3.12(3)(b) of this revenue procedure, a taxpayer changing its methods of
accounting under this section 3.12 must
take the entire net § 481(a) adjustment
into account, whether positive or negative, in computing taxable income for
the year of change in the manner provided in section 7.03 of Rev. Proc. 201513. The entire net § 481(a) adjustment
includes all aspects of the NGSH Method
described in Rev. Proc. 2023-15, including a change to the methods of accounting permitted under § 1.168(i)-1 pursuant
to section 5.08(2) of Rev. Proc. 2023-15.
However, a § 481(a) adjustment is neither required nor permitted for the late
general asset account election described
in section 5.08(2) of Rev. Proc. 2023-15.
Further, a § 481(a) adjustment is neither
required nor permitted if the taxpayer
chooses to change to the NGSH Method
on a cut-off basis under section 6.04 of
Rev. Proc. 2023-15 or if the taxpayer
changes to this method during the time
described in section 5.08(2)(a)(iii) of
Rev. Proc. 2023-15.
(b) Repair allowance property. A taxpayer changing its method of accounting
under this section 3.12 must not include
in the § 481(a) adjustment any amount
attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2) for any
taxable year in which the repair allowance
election was made.
(c) Property subject to the election
to capitalize repair and maintenance

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costs. A taxpayer changing its method of
accounting under this section 3.12 must
not include in the § 481(a) adjustment
any amount attributable to property for
which the taxpayer elected to capitalize repair and maintenance costs under
§ 1.263(a)-3(n) for any taxable year in
which this election was made.
(d) Statistical sampling. A taxpayer
changing to the NGSH Method under this
section 3.12 may use statistical sampling
in determining the § 481(a) adjustment
amount attributable to any single taxable
year by following the guidance provided
in Rev. Proc. 2011-42, 2011-37 I.R.B.
318.
(e) Extrapolation. A taxpayer changing
to the NGSH Method under this section
3.12 may use the extrapolation methodology provided in Appendix B to Rev. Proc.
2023-15 (Appendix B) in determining the
§ 481(a) adjustment amount if the taxpayer is within the scope of section 1.02
of Appendix B. Extrapolation methodologies not permitted in Appendix B are not
permitted under the NGSH Method.
(5) No audit protection for certain taxpayers. If a taxpayer chooses to change
to the NGSH Method described in Rev.
Proc. 2023-15 on a cut-off basis as permitted under section 6.04 of Rev. Proc.
2023-15 or is required to change on a cutoff basis under section 5.08(3)(b)(i) of
Rev. Proc. 2023-15, the taxpayer does not
receive audit protection under section 8.01
of Rev. Proc. 2015-13 in connection with
this change.
(6) Concurrent automatic changes.
(a) A taxpayer making changes under
this section 3.12 for more than one asset
for the same year of change must file a single Form 3115 for all such assets. The single Form 3115 must provide a single net
§ 481(a) adjustment for all such changes.
(b) A taxpayer making changes under
this section 3.12 and changes under section 6.12(3)(b) and/or section 6.15 of this
revenue procedure for linear property or
non-linear property costs for the same
year of change must file a single Form
3115 for all changes and must enter the
designated automatic accounting method
change numbers for all changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.

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(c) A taxpayer making changes under
this section 3.12 and also making a coordinating change to its linear property or
non-linear property costs under section
11.08, 12.01, 12.02, 12.08, and/or 12.12
of this revenue procedure, as applicable,
must file a single Form 3115 for the same
year of change for all these changes, provided that the taxpayer is not prohibited
from filing an automatic change under
the eligibility rules under section 5 of
Rev. Proc. 2015-13. For changes required
to be filed on a single Form 3115 under
this section, the taxpayer must enter the
designated automatic accounting method
change numbers for all changes on the
appropriate line on the Form 3115. See
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(d) A taxpayer that changes to a method
of accounting under this section 3.12 for
taxable years ending after the third taxable year ending after May 1, 2023 and
is also required to change its method of
accounting to properly capitalize its linear property or non-linear property costs
under § 263(a) and/or § 263A under section 5.08(3)(b)(ii) of Rev. Proc. 2023-15,
must file a single Form 3115 for the same
year of change for all these changes, provided that the taxpayer is not prohibited
from filing an automatic change under the
eligibility rules set out in section 5 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419. For
changes required to be filed on a single
Form 3115 under this paragraph, the taxpayer must enter the designated automatic
accounting method change numbers for
all changes on the appropriate line on the
Form 3115. See section 6.03(1)(b) of Rev.
Proc. 2015-13 for information on making
concurrent changes.
(7) Examples. The following examples illustrate this section 3.12. In each
example, it is assumed that the taxpayer
(a) is a C corporation, on an accrual
method of accounting and using a calendar taxable year, (b) is within the scope
of Rev. Proc. 2023-15, (c) placed in service natural gas transmission property
or distribution property that is described
in section 4 of Rev. Proc. 2023-15 and
is MACRS property, (d) did not make
a general asset account election for any
natural gas transmission property or distribution property placed in service by

Bulletin No. 2025–24

the taxpayer in any taxable year before
the first taxable year that the taxpayer
uses the NGSH Method, (e) is changing
its methods of accounting for both linear
property and non-linear property under
the NGSH Method for the same taxable
year, and (f) is not changing to the NGSH
Method on a cut-off basis under section
6.04 of Rev. Proc. 2023-15. Unless otherwise stated, it also is assumed that (a)
the cost of the replacements before Year
1 were not capitalized under § 263(a),
(b) the cost of the replacements before
Year 1 would not have been capitalized
if the taxpayer used the NGSH Method
provided under sections 5.02, 5.03, 5.04,
5.06, and 5.07 of Rev. Proc. 2023-15
for such prior taxable years, and (c) the
taxpayer’s natural gas transmission and
distribution property expenditures are
not per se capital expenditures under
section 5.05(1)(a)-(f), (i), or (j) of Rev.
Proc. 2023-15. Further, it is assumed
that § 1.168(i)-1(e)(3) (special rules for
certain dispositions of assets in general
asset accounts) does not apply for the
first taxable year that the taxpayer uses
the NGSH Method. Moreover, for purposes of these examples, “Year 1” refers
to the taxpayer’s first taxable year ending
after May 1, 2023, “Year 2” refers to the
taxpayer’s second taxable year ending
after May 1, 2023, and “Year 4” refers to
the taxpayer’s fourth taxable year ending
after May 1, 2023.

(a) Example 1. (i) X is a local natural gas distribution company. Before Year 1, X owned and placed
in service natural gas distribution property at a cost
of $120 million before any dispositions or additions.
Before Year 1, X replaced parts of such property that
had an original cost of $10 million and incurred $12
million for the cost of such replacements. On its Federal income tax returns before Year 1, X recognized
losses upon the dispositions of that $10 million of
property, capitalized $12 million for the cost of the
replacements of that property under § 263(a), and
deducted depreciation of $800,000 on such $12 million. X files a Form 3115 with its Federal income tax
return for Year 1 to change its methods of accounting to use the NGSH Method described in Rev. Proc.
2023-15.
(ii) Because Year 1 is X’s first taxable year ending after May 1, 2023, section 5.08(2)(a)(i) and (3)
(a) of Rev. Proc. 2023-15 apply. Pursuant to section
5.08(3)(a) of Rev. Proc. 2023-15, the per se capital
expenditure rules in section 5.05(1)(g) and (h) of
Rev. Proc. 2023-15 do not apply to the replacement
cost of $12 million that X capitalized under § 263(a)
on its Federal income tax returns before Year 1.
Accordingly, this $12 million cost of the replacements is not treated as a per se capital expenditure

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under the NGSH Method. Therefore, at the beginning of Year 1, X is treated under Rev. Proc. 202315 as owning natural gas distribution property at a
cost of $110 million ($120 million - $10 million).
Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, X
must make a late general asset account election on its
Form 3115 to include in general asset accounts all of
the $110 million of natural gas distribution property
that X owns at the beginning of Year 1. These general asset accounts also must include the total depreciation allowed or allowable before the beginning of
Year 1 for such property as the beginning balances
of the depreciation reserves. The late general asset
account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is
neither required nor permitted for the late general
asset account election change.
(iii) On its Form 3115 to change to the NGSH
Method provided under Rev. Proc. 2023-15, the
net negative § 481(a) adjustment for this change is
$11,200,000 (deduction of $12 million for the cost
of the replacements before Year 1 less depreciation
of $800,000 for such replacement assets before Year
1) and is deducted in computing X’s taxable income
for Year 1.
(b) Example 2. (i) The facts are the same as in
Example 1, except that X files a Form 3115 with
its Federal income tax return for Year 2 to change
its method of accounting to use the NGSH Method
described in Rev. Proc. 2023-15, and, before Year
2, X deducted depreciation of $1,000,000 on the
replacement cost of $12 million.
(ii) Because X filed its method change in Year
2, the special rule under section 5.08(3)(a) of Rev.
Proc. 2023-15 does not apply to the replacement cost
of $12 million that X capitalized under § 263(a) on its
Federal income tax returns before Year 1. Accordingly, section 5.05(1)(g) and (h) of Rev. Proc. 202315 apply to the replacement cost of $12 million that
X capitalized on its Federal income tax returns before
Year 2. The total cost of $12 million for this replacement is a per se capital expenditure, and must be capitalized, under the NGSH Method.
(iii) At the beginning of Year 2, X is treated
under the NGSH Method as owning natural gas distribution property at a cost of $122 million ($120
million - $10 million + $12 million). Under section
5.08(2)(a)(i) of Rev. Proc. 2023-15, X must make a
late general asset account election on its Form 3115
to include in general asset accounts all of the $122
million of natural gas distribution property that
X owns at the beginning of Year 2. These general
asset accounts also must include the total depreciation allowed or allowable before the beginning of
Year 2 for such property as the beginning balances
of the depreciation reserves. The late general asset
account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is
neither required nor permitted for the late general
asset account election.
(iv) On its Form 3115 to change to the NGSH
Method under Rev. Proc. 2023-15, the net § 481(a)
adjustment for this change is zero. Under its present
method of accounting and under the NGSH Method
(proposed method of accounting), X properly capitalized the $12 million for the cost of the replacements
before Year 1 and claimed depreciation for such
replacement assets before Year 2.

June 9, 2025

(c) Example 3. (i) Y is a local natural gas distribution company. Before Year 1, Y owned and
placed in service natural gas distribution property at a cost of $120 million before any dispositions or additions. Before Year 1, Y replaced
parts of such property that had an original cost of
$10 million and incurred $12 million for the cost
of such replacements. On its Federal income tax
returns before Year 1, Y recognized losses upon
the dispositions of that $10 million of property and
deducted $12 million for the cost of the replacements of such property under § 162(a). During
Year 1, Y replaced a part of the natural gas distribution property that had an original cost of $2
million and incurred $3 million for the cost of such
replacements. If Y had capitalized the $15 million
for the cost of the replacements, the total depreciation allowed or allowable for these assets would
have been $1 million before Year 2. On its Federal
income tax return for Year 1, Y recognized a loss
upon the disposition of that $2 million of property
and deducted $3 million for the cost of the replacements under § 162(a). Y files a Form 3115 with its
Federal income tax return for Year 2 to change its
method of accounting to use the NGSH Method
described in Rev. Proc. 2013-15.
(ii) Because Y filed its method change for Year 2,
section 5.08(2)(a)(i) of Rev. Proc. 2023-15 applies to
this change. However, the special rule under section
5.08(3)(a) of Rev. Proc. 2023-15 would apply only
if Y had filed its method change for Year 1. Accordingly, section 5.05(1)(g) and (h) of Rev. Proc. 202315 apply to the replacement cost of $12 million that
Y deducted under § 162(a) on its Federal income tax
returns before Year 1, and to the replacement cost
of $3 million that Y deducted under § 162(a) on its
Federal income tax return for Year 1. Therefore, the
total cost of $15 million for these replacements is a
per se capital expenditure, and must be capitalized,
under the NGSH Method.
(iii) At the beginning of Year 2, Y is treated under
Rev. Proc. 2023-15 as owning natural gas distribution property at a cost of $123 million ($120 million $10 million + $12 million - $2 million + $3 million).
Under section 5.08(2)(a)(i) of Rev. Proc. 2023-15, Y
must make a late general asset account election on its
Form 3115 to include in general asset accounts all of
the $123 million of natural gas distribution property
that Y owns at the beginning of Year 2. These general
asset accounts also must include the total depreciation allowed or allowable before the beginning of
Year 2 for such property as the beginning balances
of the depreciation reserves. The late general asset
account election change is made on a modified cutoff method and, therefore, a § 481(a) adjustment is
neither required nor permitted for the late general
asset account election.
(iv) On its Form 3115 to change to the NGSH
Method of Rev. Proc. 2023-15, the net positive
§ 481(a) adjustment for this change is $14 million
($15 million for the cost of the replacements before
Year 2 less depreciation allowed or allowable of $1
million for such replacement assets before Year 2)
and is taken into account in computing Y’s income
in the manner provided in section 3.12(4)(a) of this
revenue procedure.
(d) Example 4. (i) Z is a local natural gas distribution company. Before Year 4, Z owned and placed

June 9, 2025

in service natural gas distribution property at a cost
of $150 million before any dispositions or additions.
Before Year 4, Z replaced parts of such property that
had an original cost of $30 million and incurred $45
million for the cost of such replacements. On its Federal income tax returns before Year 4, Z recognized
losses upon the dispositions of that $30 million of
property, capitalized $45 million for the cost of the
replacements under § 263(a), and deducted depreciation of $15 million on such $45 million. Z files
a Form 3115 with its Federal income tax return for
Year 4 to change its method of accounting to use
the NGSH Method described in Rev. Proc. 2013-15.
Assume Z is eligible to file Form 3115 for Year 4
under the automatic change procedures in Rev. Proc.
2015-13.
(ii) At the beginning of Year 4, Z owns natural gas distribution property at a cost of $165
million ($150 million - $30 million + $45 million). Because Year 4 is Z’s fourth taxable year
ending after May 1, 2023, sections 5.08(2)(a)
(iii) and 5.08(3)(b) of Rev. Proc. 2023-15 apply.
Accordingly, under section 5.08(2)(a)(iii) of Rev.
Proc. 2023-15, Z must make a late general asset
account election on its Form 3115 to include in
general asset accounts all of the $165 million of
natural gas distribution property that Z owns at the
beginning of Year 4. These general asset accounts
also must include the total depreciation allowed or
allowable before the beginning of Year 4 for such
property as the beginning balances of the depreciation reserves. The late general asset account
election change is made using a modified cut-off
method and, therefore, a § 481(a) adjustment is
neither permitted nor required for the late general
asset account election.
(iii) Because sections 5.08(2)(a)(iii) and 5.08(3)
(b) of Rev. Proc. 2023-15 apply, Z’s change to the
NGSH Method described in Rev. Proc. 2023-15,
applies only to natural gas transmission and distribution property expenditures paid or incurred by Z
beginning in Year 4 and is made on a cut-off basis.
Therefore, a § 481(a) adjustment is neither required
nor permitted for the change to the NGSH Method
described in Rev. Proc. 2023-15.
(e) Example 5. (i) The facts are the same as
in Example 4, except that, on its Federal income
tax returns before Year 4, Z improperly deducted
$45 million for the cost of the replacements under
§ 162(a). Such $45 million of replacement costs
should have been capitalized under § 263(a). If Z
had capitalized the $45 million for the cost of the
replacements, the total depreciation allowed or
allowable for such assets would have been $15 million before Year 4.
(ii) Because Year 4 is Z’s fourth taxable year
ending after May 1, 2023, sections 5.08(2)(a)(iii) and
5.08(3)(b) of Rev. Proc. 2023-15 apply. Pursuant to
section 5.08(3)(b) of Rev. Proc. 2023-15, Z must also
change its method of accounting to capitalize under
§ 263(a) the $45 million for the cost of the replacements incurred before Year 4. The net positive
§ 481(a) adjustment for this coordinating change is
$30 million ($45 million for the cost of the replacements before Year 4 less depreciation allowed or
allowable of $15 million for such replacement assets
before Year 4). Z takes this net positive § 481(a)
adjustment of $30 million into account in computing

1486

Z’s taxable income in the manner provided in section
3 .12(4)(a) of this revenue procedure .
(iii) Z owns natural gas distribution property at
a cost of $165 million ($150 million - $30 million
+ $45 million) at the beginning of Year 4 . Accordingly, Z must make a late general asset account
election on its Form 3115 to include in general asset
accounts all of the $165 million of natural gas distribution property that Z owns at the beginning of Year
4 . These general asset accounts also must include the
total depreciation allowed or allowable before the
beginning of Year 4 for such property as the beginning balances of the depreciation reserves . The late
general asset account election change is made using
a modified cut-off method and, therefore, a § 481(a)
adjustment is neither permitted nor required for the
late general asset account election .
(iv) Because sections 5 .08(2)(a)(iii) and 5 .08(3)
(b) of Rev . Proc . 2023-15 apply, Z’s change to
the NGSH Method provided under sections 5 .02,
5 .03, 5 .04, 5 .06, and 5 .07 of Rev . Proc . 2023-15,
applies only to natural gas transmission and distribution property expenditures paid or incurred by Z
beginning in Year 4 and is made on a cut-off basis.
Therefore, a § 481(a) adjustment is neither required
nor permitted for the change to the NGSH Method
described in Rev . Proc . 2023-15 .
(v) Pursuant to section 3 .12(6)(c) and section
5 .08(3)(b) of Rev . Proc . 2023-15 the change to
capitalize the replacement costs of $45 million, the
late general asset account election change, and the
change to use the NGSH Method provided under
Rev . Proc . 2023-15 must be included on the same
Form 3115 filed by Z for Year 4 .

(8) Option to treat method changes
filed for Year 2 as filed for Year 1 for purposes of section 5.08(3)(a) of Rev. Proc.
2023-15 .
(a) In general . A taxpayer may choose
to treat a method change filed for the taxpayer’s second taxable year ending after
May 1, 2023 (Year 2), as filed for the
taxpayer’s first taxable year ending after
May 1, 2023 (Year 1), solely for purposes
of applying the special rule under section
5.08(3)(a) of Rev. Proc. 2023-15. Specifically, a taxpayer changing to the safe harbor method for linear property or for both
linear property and non-linear property, as
applicable, for the taxpayer’s second taxable year ending after May 1, 2023, with
a § 481(a) adjustment may choose not to
apply the per se capital expenditure rules
under section 5 .05(1)(g) and (h) of Rev .
Proc . 2023-15 to amounts paid or incurred
to replace or repair linear property or both
linear property and non-linear property, as
applicable, in taxable years ending on or
before May 1, 2023 . A taxpayer choosing
to treat a method change filed for Year 2 as
filed for Year 1 under this section 3.12(8)
must otherwise comply with all the provisions of Rev . Proc . 2023-15 .

Bulletin No. 2025–24

(b) Application. A taxpayer that
changed to the safe harbor method for
linear property or both linear property
and non-linear property, as applicable,
for Year 1, may not choose to treat a
method change filed for Year 2 as filed
for Year 1 under paragraph 3.12(8) of
this revenue procedure. Further, if a taxpayer chooses to treat a method change
filed for Year 2 as filed for Year 1 under
paragraph 3.12(8) of this revenue procedure, the taxpayer must do so for all
members of a consolidated group changing to the NGSH Method.
(c) Example. The examples in section
3.12(7)(a) through (e) of this revenue
procedure address taxpayers that do not
choose to treat a method change filed for
Year 2 as filed for Year 1 under this section
3.12(8). The following example illustrates
this section 3.12(8). The assumptions set
out in 3.12(7) of this revenue procedure
apply to this example.

(i) A is a local natural gas distribution company. Before Year 1, A owned and placed in service natural gas distribution property at a cost of
$120 million before any dispositions or additions.
Before Year 1, A replaced parts of such property
that had an aggregate original cost of $10 million
and incurred $12 million for the cost of the replacements. On its Federal income tax returns for taxable years before Year 1, A recognized losses upon
the disposition of that $10 million of property,
capitalized $12 million of the replacement costs of
such property under § 263(a), and deducted depreciation of $800,000 on the $12 million of replacement costs. During Year 1, A replaced a part of
the natural gas distribution property that had an
original cost of $2 million and incurred $3 million
for the cost of such replacements. On its Federal
income tax return for Year 1, A recognized a loss
upon the disposition of that $2 million of property,
capitalized $3 million for the cost of such replacements under § 263(a), and deducted depreciation of
$200,000 on the $3 million of replacement costs.
A files a Form 3115 with its Federal income tax
return for Year 2 to change its method of accounting to use the NGSH Method described in Rev.
Proc. 2023-15 and chooses to treat its method
change filed for Year 2 as filed for Year 1 under
section 3.12(8) of this revenue procedure. Accordingly, A does not apply the per se capitalization
rules of section 5.05(1)(g) and (h) of Rev. Proc.
2023-15 to amounts paid or incurred to replace or
repair linear property or both linear property and
non-linear property, as applicable, in taxable years
ending on or before May 1, 2023.
(ii) Because A chooses to treat its method
change filed for Year 2 as filed for Year 1 under
paragraph 3.12(8)(a) of this revenue procedure,
the special transition rule under section 5.08(3)(a)
applies to amounts paid or incurred by A to replace
or repair linear natural gas distribution or both linear property and non-linear property distribution

Bulletin No. 2025–24

property, as applicable, in taxable years ending
on or before May 1, 2023 . Accordingly, the per se
capital expenditure rules under section 5 .05(1)(g)
and (h) of Rev . Proc . 2023-15 do not apply to the
replacement cost of $12 million that A capitalized
under § 263(a) on its Federal income tax returns for
taxable years ending on or before May 1, 2023 . As
a result, the replacement cost of $12 million is not
required to be capitalized under the NGSH Method .
However, the per se capital expenditure rules under
section 5 .05(1)(g) and (h) of Rev . Proc . 2023-15
do apply to the replacement cost of $3 million that
A capitalized on its Federal income tax return for
Year 1 . The total cost of $3 million for this replacement is a per se capital expenditure and must be
capitalized under the NGSH Method .
(iii) Therefore, at the beginning of Year 2, A is
treated under Rev . Proc . 2023-15 as owning natural gas distribution property with an original cost
of $111 million ($120 million - $10 million - $2
million + $3 million) . Under section 5 .08(2)(a)(i)
of Rev . Proc . 2023-15, A must make a late general
asset account election on its Form 3115 to include
in general asset accounts all of the $111 million of
natural gas distribution property that A owns at the
beginning of Year 2 . These general asset accounts
also must include the total depreciation allowed or
allowable before the beginning of Year 2 for such
property as the beginning balances of the depreciation reserves . The late general asset account election
change is made on a modified cut-off method and,
therefore, a § 481(a) adjustment is neither required
nor permitted for the late general asset account election change .
(iv) On its Form 3115 to change to the NGSH
Method provided under Rev . Proc . 2023-15 for
Year 2, the net negative § 481(a) adjustment for
this change is $11,200,000 (deduction of $12 million for the cost of the replacements before Year 1
less depreciation of $800,000 for such replacement
assets before Year 1) . Because A property capitalized the $3 million for the cost of the replacements
in Year 1 as per se capital expenditures under
section 5 .05(1)(g) and (h) of Rev . Proc . 2023-15
and properly claimed depreciation in Year 1 for
such replacement assets, A does not include in its
§ 481(a) adjustment any amounts related to the cost
of replacements in Year 1 . Accordingly, A deducts
$11,200,000 in computing A’s taxable income for
Year 2 .

(9) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change to the methods of
accounting under this section 3 .12 is
“269 .”
(10) Contact information . For further
information regarding a change under this
section, contact Riston Escher at (202)
317-5100 (not a toll-free number) .
SECTION 4 . BAD DEBTS (§ 166)
.01 Change from reserve method to
specific charge-off method .

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(1) Description of change . This change
applies to a taxpayer (other than a bank
as defined in § 585(a)(2)) that wants to
change its method of accounting for bad
debts from a reserve method (or other
improper method) to a specific charge-off
method that complies with § 166 . For procedures applicable to banks, see § 585(c)
and the regulations thereunder and section
25 of this revenue procedure .
(2) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
4 .01 is “5 .”
(3) Contact information . For further
information regarding a change under
this section, contact Benjamin Masselli at
(202) 317-7003 (not a toll-free number) .
.02 Conformity election by bank after
previous election automatically revoked .
(1) Description of change . This change
applies to a bank that wants to change
its method of accounting for bad debts
by making the conformity election under
§ 1 .166-2(d)(3)(iii)(C)(3) .
(2) Applicability . This change
only applies to a bank (as defined in
§ 1 .166-2(d)(4)(i)) that:
(a) is subject to supervision by Federal
authorities, or by state authorities maintaining substantially equivalent standards;
(b) has previously adopted or elected
to change to the method of accounting for
bad debts described in § 1 .166-2(d)(3);
(c) has had that previous election automatically revoked under § 1 .166-2(d)(3)
(iv)(C);
(d) meets the express determination
requirement of § 1 .166-2(d)(3)(iii)(D) for
the year of change; and
(e) now seeks the consent of the Commissioner to make an election under
§ 1 .166-2(d)(3)(iii)(C)(3) .
(3) Certain eligibility rule inapplicable . The eligibility rule in section 5 .01(1)
(f) of Rev . Proc . 2015-13, 2015-5 I .R .B .
419, does not apply to this change .
(4) Designated automatic accounting
method change number . The designated
automatic accounting method change
number for a change under this section
4 .02 is “211 .”
(5) Contact information . For further
information regarding a change under this
section, contact K . Scott Brown at (202)
317-4423 (not a toll-free number) .

June 9, 2025

.03 Change to the allowance chargeoff method.
(1) Description of change.
(a) Applicability. This change applies
to a regulated financial company (as
defined in proposed § 1.166-2(d)(4)(ii)) or
a member of a regulated financial group
(as defined in proposed § 1.166-2(d)(4)
(iii)) that wants to change its method of
accounting to the Allowance Charge-off
Method described in proposed § 1.1662(d)(1). See Bad Debt Deductions for
Regulated Financial Companies and
Members of Regulated Financial Groups,
88 FR 89636 (Dec. 28, 2023).
(b) Inapplicability. This change
does not apply to a bank (as defined in
§ 581) that wants to change its method
of accounting for bad debts from the
§ 585 reserve method to the Allowance
Charge-off Method described in proposed § 1.166-2(d)(1). Any change to the
Allowance Charge-off Method requested
by such a bank must be made under the
non-automatic change procedures in Rev.
Proc. 2015-13.
(2) Certain eligibility rule inapplicable. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13 does not apply
to a change described in section 4.03(1)(a)
of this revenue procedure for the taxpayer’s first or second taxable year ending on
or after December 28, 2023.
(3) Manner of making change.
(a) Charge-offs on or after beginning of
the year of change. This change is made on
a cut-off basis and only applies to chargeoffs (as defined in proposed § 1.166-2(d)
(4)(i)) made by a regulated financial company or a member of a regulated financial
group on its applicable financial statement
(as defined in proposed § 1.166-2(d)(4)
(viii)) that occur on or after the beginning of the year of change. Accordingly,
a § 481(a) adjustment is neither permitted
nor required.
(b) Charge-offs prior to the year of
change. Any charge-offs that occurred
prior to the year of change are accounted
for under the taxpayer’s former method
of accounting, and any charge-offs that
occur in the year of change and in subsequent taxable years are accounted for
under the taxpayer’s method of accounting for which consent is granted. In no
event may a taxpayer take a deduction
under its new method of accounting for

June 9, 2025

any amount of debt previously deducted
as worthless under its former method of
accounting.
(4) Revocation of conformity election
under existing § 1.166-2(d)(3). A regulated financial company or a member of
a regulated financial group that previously made a conformity election under
§ 1.166-2(d)(3) and that changes its
method of accounting under this section
4.03 is treated as having revoked its conformity election pursuant to § 1.166-2(d)
(3)(iv).
(5) Contact information. For further
information regarding a change under this
section, contact Jason Kristall at (202)
317-6945 (not a toll-free number).
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
4.03 is “272.”
SECTION 5. INTEREST EXPENSE
(§163) AND AMORTIZABLE BOND
PREMIUM (§ 171)
.01 Revocation of § 171(c) election.
(1) Description of change. This change
applies to a taxpayer that wants to change
its method of accounting for amortizable
bond premium by revoking its § 171(c)
election. Under § 171(c), a taxpayer that
holds certain taxable bonds may elect to
amortize any bond premium on the bonds
in accordance with regulations prescribed
by the Secretary. Sections 1.171-1 through
1.171-5 provide rules relating to the amortization of bond premium by a taxpayer.
Section 1.171-4 provides the procedures
to make a § 171(c) election to amortize
bond premium.
(2) Revocation of election. The revocation of a § 171(c) election applies to all
taxable bonds that are held by the taxpayer
on the first day of the first taxable year for
which the revocation is effective (year of
change), and to all taxable bonds that are
subsequently acquired by the taxpayer.
(3) Manner of making change. This
change is made using a cut-off basis and
applies only to taxable bonds held on or
after the beginning of the year of change.
Accordingly, a § 481(a) adjustment is neither permitted nor required.
Under the cut-off basis, for taxable
bonds held at the beginning of the year

1488

of change, the taxpayer may not amortize any remaining bond premium on the
bonds. Because the cut-off basis is prescribed for this change, the basis of any
bond, adjusted for amounts previously
amortized during the period of the election, is not affected by the revocation.
(4) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
5.01 is “16.”
(5) Additional requirements. On a
statement attached to the Form 3115, the
taxpayer must provide:
(a) the reason(s) for revoking the election; and
(b) a description of the method by
which, and the date on which, the taxpayer made the § 171(c) election that is
proposed to be revoked.
(6) Audit protection. Any audit protection applicable to this change under
section 8 of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, does not preclude the Commissioner from examining the method
used by the taxpayer to determine the
amount of amortizable bond premium
under § 171(b) for a taxable year prior to
the year of change.
(7) Contact information. For further
information regarding a change under this
section, contact Steven Harrison at (202)
317-6842 (not a toll-free number).
.02 Change to comply with § 163(e)(3).
(1) Description of change. This
change applies to a taxpayer that wants
to change its method or methods of
accounting to comply with the requirements of § 163(e)(3), which defers certain deductions attributable to original
issue discount debt instruments held
by related foreign persons. Any portion
of the original issue discount will not be
allowable as a deduction to the U.S. person issuer until paid.
(2) Accelerated § 481(a) adjustment
period in certain situations. In addition
to the circumstances set forth in section
7.03(4) of Rev. Proc. 2015-13, 2015-5
I.R.B. 419, the § 481 adjustment period
provided in section 7.03 of Rev. Proc.
2015-13 will be accelerated for a U.S. person with a remaining balance of a § 481(a)
adjustment that arose by reason of a
change in method of accounting described
in this section 5.02 if a debt instrument

Bulletin No. 2025–24

subject to the change is paid off, retired,
or significantly modified within the meaning of § 1.1001-3 prior to the end of the
§ 481(a) adjustment period. The portion
of the remaining § 481(a) adjustment
attributable to the debt instrument must
be taken into account in the taxable year
the debt instrument is paid off, retired, or
significantly modified within the meaning
of § 1.1001-3.
(3) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under this section
5.02 is “212.”
(4) Contact information. For further
information regarding a change under this
section, contact Dylan Steiner at (202)
317-6934 (not a toll-free number).
SECTION 6. DEPRECIATION OR
AMORTIZATION (§§ 56(a)(1),
167, 168, 197, 280F(a), or 1502, OR
FORMER §§ 56(g)(4)(A), 168, 1400I,
1400L, or 1400N(d))
.01 Impermissible to permissible
method of accounting for depreciation or
amortization.
(1) Description of change.
(a) Applicability. This change applies
to a taxpayer that wants to change from an
impermissible to a permissible method of
accounting for depreciation or amortization (depreciation) for any item of depreciable or amortizable property under the
taxpayer’s present or proposed method of
accounting:
(i) for which the taxpayer used the
impermissible method of accounting in at
least two taxable years immediately preceding the year of change (but see section
6.01(1)(b) of this revenue procedure for
property placed in service in the taxable
year immediately preceding the year of
change);
(ii) for which the taxpayer is making
a change in method of accounting under
§ 1.446-1(e)(2)(ii)(d);
(iii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A)
(as in effect on the day before the date
of enactment of Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA)), § 167, § 168, § 197, § 1400I,
or § 1400L(c), under § 168 prior to its

Bulletin No. 2025–24

amendment in 1986 (former § 168), or
under any additional first year depreciation deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b),
or § 1400N(d)); and
(iv) that is owned by the taxpayer at
the beginning of the year of change (but
see section 6.07 of this revenue procedure
for property disposed of before the year of
change).
(b) Taxpayer has not adopted a
method of accounting for the item of
property. If a taxpayer does not satisfy
section 6.01(1)(a)(i) of this revenue
procedure for an item of depreciable or
amortizable property because this item
of property is placed in service by the
taxpayer in the taxable year immediately
preceding the year of change (“1-year
depreciable property”), the taxpayer may
change from the impermissible method of
determining depreciation to the permissible method of determining depreciation
for the 1-year depreciable property by
filing a Form 3115 for this change, provided the § 481(a) adjustment reported
on the Form 3115 includes the amount of
any adjustment that is attributable to all
property (including the 1-year depreciable property) subject to the Form 3115.
Alternatively, the taxpayer may change
from the impermissible method of determining depreciation to the permissible
method of determining depreciation for a
1-year depreciable property by filing an
amended federal income tax return, or an
administrative adjustment request under
§ 6227 (AAR), as applicable, for the
property’s placed-in-service year prior
to the date the taxpayer files its federal
income tax return for the taxable year
succeeding the placed-in-service year.
(c) Inapplicability. This change does
not apply to:
(i) any property to which § 1016(a)(3)
(regarding property held by a tax-exempt
organization) applies;
(ii) a taxpayer that is required under
§ 263A and the regulations thereunder to
capitalize the costs with respect to which
the taxpayer wants to change its method
of accounting under this section 6.01 if
the taxpayer is not capitalizing these costs,
unless the taxpayer concurrently changes
its method to capitalize these costs in
conjunction with a change to a UNICAP
method under section 12.01, 12.02, 12.08,

1489

or 12.12 of this revenue procedure (as
applicable);
(iii) any property for which a taxpayer
is making a change in depreciation under
§ 1.446-1(e)(2)(ii)(d)(2)(vi) or (vii);
(iv) any property subject to § 167(g)
regarding property depreciated under the
income forecast method;
(v) any § 1250 property that a taxpayer
is reclassifying to an asset class of Rev.
Proc. 87-56, 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-22,
1988-1 C.B. 785), or Rev. Proc. 83-35,
1983-1 C.B. 745, as appropriate, that does
not explicitly include § 1250 property (for
example, asset class 57.0, Distributive
Trades and Services);
(vi) any property for which a taxpayer is revoking a timely valid election,
or making a late election, under § 167,
§ 168, § 179, § 1400I, § 1400L(c), former § 168, § 13261(g)(2) or (3) of the
Revenue Reconciliation Act of 1993
(1993 Act), 1993-3 C.B. 1, 128 (relating to amortizable § 197 intangibles),
or any additional first year depreciation
deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b),
or § 1400N(d)). A taxpayer may request
consent to revoke or make the election
by submitting a request for a letter ruling
under Rev. Proc. 2025-1, 2025-1 I.R.B.
1 (or successor). However, if a taxpayer
is revoking or making an election under
§ 179, see § 179(c) and § 1.179-5. See
§ 1.446-1(e)(2)(ii)(d)(3)(iii);
(vii) any property for which depreciation is determined under § 56(g)(4)(A)
(as in effect on the day before the date of
enactment of the TCJA) or § 167 (other
than under § 168, § 1400I, § 1400L(c),
former § 168, or any additional first year
depreciation deduction provision of the
Code (for example, § 168(k), § 168(l),
§ 1400L(b), or § 1400N(d)) and a taxpayer is changing the useful life of the
property. A change in the useful life of
property is corrected by adjustments
in the applicable taxable year provided
under § 1.446-1(e)(2)(ii)(d)(5)(iv). However, this section 6.01(1)(c)(vii) does
not apply if the taxpayer is changing to
or from a useful life, recovery period,
or amortization period that is specifically assigned by the Code (for example,
§ 167(f)(1), § 168(c)), the regulations
thereunder, or other guidance published

June 9, 2025

in the Internal Revenue Bulletin and,
therefore, this change is a change in
method of accounting (unless section
6.01(1)(c)(xv) of this revenue procedure
applies). See § 1.446-1(e)(2)(ii)(d)(3)(i);
(viii) any depreciable property for
which the use changes in the hands of the
same taxpayer. See § 1.446-1(e)(2)(ii)(d)
(3)(ii). But see sections 6.04 and 6.05 of
this revenue procedure for changing to
the methods of accounting provided in
§ 1.168(i)-1(c)(2)(ii)(I) or § 1.168(i)-1(h)
(2), and § 1.168(i)-4, respectively;
(ix) any property for which depreciation is determined in accordance
with § 1.167(a)-11 (regarding the Class
Life Asset Depreciation Range System
(ADR));
(x) any change in method of accounting involving a change from deducting the
cost or other basis of any property as an
expense to capitalizing and depreciating
the cost or other basis, or vice versa (but
see section 11.08 of this revenue procedure for making such a change in method
of accounting under the final tangible
property regulations);
(xi) any change in method of accounting involving a change from one permissible method of accounting for the property
to another permissible method of accounting for the property. For example:
(A) a change from the straight-line
method of depreciation to the income
forecast method of depreciating for videocassettes. See Rev. Rul. 89-62, 1989-1
C.B. 78; or
(B) a change from charging the depreciation reserve with costs of removal
and crediting the depreciation reserve
with salvage proceeds to deducting costs
of removal as an expense (provided the
costs of removal are not required to be
capitalized under any provision of the
Code, such as § 263(a)) and including
salvage proceeds in taxable income (see
section 6.02 of this revenue procedure
for making this change for property for
which depreciation is determined under
§ 167);
(xii) any change in method of accounting involving both a change from treating
the cost or other basis of the property as
nondepreciable or nonamortizable property to treating the cost or other basis
of the property as depreciable or amortizable property and the adoption of a

June 9, 2025

method of accounting for depreciation
requiring an election under § 167, § 168,
§ 1400I, § 1400L(c), former § 168,
§ 13261(g)(2) or (3) of the 1993 Act,
or any additional first year depreciation
deduction provision of the Code (for
example, § 168(k), § 168(l), § 1400L(b),
or § 1400N(d)) (for example, a change in
the treatment of the space consumed in
landfills placed in service in 2006 from
nondepreciable to depreciable property
(assuming section 6.01(1)(c)(xiii) of this
revenue procedure does not apply) and
the making of an election under § 168(f)
(1) to depreciate this property under the
unit-of-production method of depreciation under § 167);
(xiii) any change in method of accounting for any item of income or deduction
other than depreciation, even if the change
results in a change in computing depreciation under § 1.446-1(e)(2)(ii)(d)(2)(i),
(ii), (iii), (iv), (v), (vi), (vii), or (viii). For
example, a change in method of accounting involving:
(A) a change in inventory costs (for
example, when property is reclassified
from inventory property to depreciable
property, or vice versa) (but see section
11.02 of this revenue procedure for making a change in method of accounting
from inventory property to depreciable
property for unrecoverable line pack gas
or unrecoverable cushion gas, and section 11.06 of this revenue procedure for
making a change in method of accounting
from inventory property to depreciable
property for rotable spare parts); or
(B) a change in the character of a transaction from sale to lease, or vice versa (but
see section 6.03 of this revenue procedure
for making this change);
(xiv) a change from determining
depreciation under § 168 to determining
depreciation under former § 168 for any
property subject to the transition rules in
§ 203(b) or § 204(a) of the Tax Reform
Act of 1986, 1986-3 (Vol. 1) C.B. 1,
60-80;
(xv) any change in the placed-in-service date of a depreciable or amortizable
property. This change is corrected by
adjustments in the applicable taxable year
provided under § 1.446-1(e)(2)(ii)(d)(5)
(v);
(xvi) any property for which the taxpayer has claimed a federal income tax

1490

credit (e.g., the rehabilitation credit under
§ 47), unless the change does not alter the
amount of the federal income tax credit;
(xvii) any qualified improvement property, as defined in § 168(e)(6), placed in
service by the taxpayer after December
31, 2017, to which section 6.18 of this
revenue procedure applies;
(xviii) any property to which section
4 or 5 of Rev. Proc. 2020-22, 2020-18
I.R.B. 745, applies. (See sections 4.02
and 4.03, or 5.02 of Rev. Proc. 2020-22,
as applicable, for making any changes to
depreciation for such property.);
(xix) any change in method of accounting to which section 6.20 of this revenue
procedure applies; or
(xx) the change in method of accounting specified in section 6.21 of this revenue procedure.
(2) Certain eligibility rules inapplicable. The eligibility rule in section 5.01(1)
(d) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to this change. If
during any of the five taxable years ending with the year of change, a taxpayer
requested or made a change in method of
accounting from expensing to capitalizing, or vice versa, the cost or other basis
of an asset, the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 is not
applicable to a change under this section
6.01 for that same asset.
(3) Additional requirements. A taxpayer also must comply with the following:
(a) Permissible method of accounting
for depreciation. A taxpayer must change
to a permissible method of accounting
for depreciation for the item of depreciable or amortizable property. The permissible method of accounting is the same
method that determines the depreciation
allowable for the item of property (as
provided in section 6.01(7) of this revenue procedure).
(b) Statements required. A taxpayer
(including a qualified small taxpayer as
defined in section 6.01(4)(b) of this revenue procedure) must provide the following statements, if applicable, and attach
them to the completed Form 3115:
(i) a detailed description of the present
and proposed methods of accounting. A
general description of these methods of
accounting is unacceptable (for example,
MACRS to MACRS, erroneous method

Bulletin No. 2025–24

to proper method, claiming less than the
depreciation allowable to claiming the
depreciation allowable);
(ii) to the extent not provided elsewhere on the Form 3115, a statement
describing the taxpayer’s business or
income-producing activities. Also, if the
taxpayer has more than one business or
income-producing activity, a statement
describing the taxpayer’s business or
income-producing activity in which the
item of property at issue is primarily used
by the taxpayer;
(iii) to the extent not provided elsewhere on the Form 3115, a statement of
the facts and law supporting the proposed
method of accounting, new classification
of the item of property, and new asset
class in, as appropriate, Rev. Proc. 87-56
or Rev. Proc. 83-35. If the taxpayer is the
owner and lessor of the item of property
at issue, the statement of the facts and law
supporting the new asset class also must
describe the business or income-producing activity in which that item of property is primarily used by the lessee;
(iv) to the extent not provided elsewhere on the Form 3115, a statement
identifying the year in which the item of
property was placed in service by the taxpayer;
(v) if any item of property is public
utility property within the meaning of
§ 168(i)(10) or former § 167(l)(3)(A),
as applicable, a statement providing that
the taxpayer agrees to the following additional terms and conditions:
(A) a normalization method of accounting (within the meaning of former § 167(l)
(3)(G), former § 168(e)(3)(B), or § 168(i)
(9), as applicable) will be used for the
public utility property subject to the Form
3115;
(B) as of the beginning of the year
of change, the taxpayer will adjust its
deferred tax reserve account or similar
reserve account in the taxpayer’s regulatory books of account by the amount of
the deferral of federal income tax liability
associated with the § 481(a) adjustment
applicable to the public utility property
subject to the Form 3115; and
(C) within 30 calendar days of filing
the federal income tax return for the year
of change, the taxpayer will provide a
copy of the completed Form 3115 to any
regulatory body having jurisdiction over

Bulletin No. 2025–24

the public utility property subject to the
Form 3115;
(vi) if the taxpayer is changing the classification of an item of § 1250 property
placed in service after August 19, 1996, to
a retail motor fuels outlet under § 168(e)
(3)(E)(iii), a statement containing the following representation: “For purposes of
§ 168(e)(3)(E)(iii) of the Internal Revenue
Code, the taxpayer represents that (A) 50
percent or more of the gross revenue generated from the item of § 1250 property is
from the sale of petroleum products (not
including gross revenue from related services, such as the labor cost of oil changes
and gross revenue from the sale of nonpetroleum products such as tires and oil
filters), (B) 50 percent or more of the floor
space in the item of property is devoted
to the sale of petroleum products (not
including floor space devoted to related
services, such as oil changes and floor
space devoted to nonpetroleum products
such as tires and oil filters), or (C) the item
of § 1250 property is 1,400 square feet or
less.”; and
(vii) if the taxpayer is changing the
classification of an item of property from
§ 1250 property to § 1245 property under
§ 168 or former § 168, a statement of the
facts and law supporting the new § 1245
property classification, and a statement
containing the following representation:
“Each item of depreciable property that is
the subject of the Form 3115 filed under
section 6.01 of Rev. Proc. 2025-23 for
the year of change beginning [Insert the
date], and that is reclassified from [Insert,
as appropriate: nonresidential real property, residential rental property, qualified
leasehold improvement property, qualified restaurant property, qualified retail
improvement property, qualified improvement property as defined in § 168(e)(6)
(as amended by § 13204 of the TCJA),
19-year real property, 18-year real property, or 15-year real property] to an asset
class of [Insert, as appropriate, either:
Rev. Proc. 87-56, 1987-2 C.B. 674, or
Rev. Proc. 83-35, 1983-1 C.B. 745] that
does not explicitly include § 1250 property, is § 1245 property for depreciation
purposes.”
(4) Reduced filing requirement for
qualified small taxpayers.
(a) In general. A qualified small taxpayer, as defined in section 6.01(4)(b)

1491

of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2022) to
make this change:
(i) The identification section of page 1
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16c, 17, and 19;
(v) Part IV, all lines except line 25; and
(vi) Schedule E.
(b) Definition of qualified small taxpayer. A “qualified small taxpayer”
is a taxpayer whose average annual
gross receipts, as determined under
§ 1.263(a)-3(h)(3), for the three preceding taxable years is less than or equal to
$10,000,000.
(5) Section 481(a) adjustment.
Because the adjusted basis of the property is changed as a result of a method
change made under this section 6.01 (see
section 6.01(6) of this revenue procedure), items are duplicated or omitted.
Accordingly, this change is made with
a § 481(a) adjustment. This adjustment
may result in either a negative § 481(a)
adjustment (a decrease in taxable
income) or a positive § 481(a) adjustment (an increase in taxable income)
and may be a different amount for regular tax, alternative minimum tax, and
adjusted current earnings purposes. This
§ 481(a) adjustment equals the difference
between the total amount of depreciation
taken into account in computing taxable
income for the property under the taxpayer’s present method of accounting
(including the amount attributable to any
property described in section 6.01(1)(b)
of this revenue procedure that is included
in the taxpayer’s Form 3115), and the
total amount of depreciation allowable
for the property under the taxpayer’s proposed method of accounting (as determined under section 6.01(7) of this revenue procedure, and including the amount
attributable to any property described in
section 6.01(1)(b) of this revenue procedure that is included in the taxpayer’s
Form 3115), for open and closed years
prior to the year of change. However, the
amount of the § 481(a) adjustment must
be adjusted to account for the proper
amount of the depreciation allowable

June 9, 2025

that is required to be capitalized under
any provision of the Code (for example,
§ 263A) at the beginning of the year of
change .
(6) Basis adjustment . As of the beginning of the year of change, the basis of
depreciable property to which this section
6.01 applies must reflect the reductions
required by § 1016(a)(2) for the depreciation allowable for the property (as determined under section 6 .01(7) of this revenue procedure) .
(7) Meaning of depreciation allowable .
(a) In general . Section 6 .01(7) of this
revenue procedure provides the amount
of the depreciation allowable determined
under § 56(a)(1), § 56(g)(4)(A) (as in
effect on the day before the date of enactment of the TCJA), § 167, § 168, or § 197,
or former § 168, § 1400I, or § 1400L(c) .
This amount, however, may be limited by
other provisions of the Code (for example,
§ 280F) .
(b) Section 56(a)(1) property . The
depreciation allowable for any taxable
year for property for which depreciation is
determined under § 56(a)(1) is determined
by using the depreciation method, recovery period, and convention provided for
under § 56(a)(1) that applies for the property’s placed-in-service date .
(c) Section 56(g)(4)(A) property . The
depreciation allowable for any taxable
year for property for which depreciation
is determined under § 56(g)(4)(A) (as in
effect on the

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ae8a97fdf279371c7. Public record. Not legal advice.